How many of you panicked over the weekend into Monday morning about the tariff news?
If you did, I get it. The media did everything possible to horrify everyone, all but declaring the end of the world.
I couldn’t share their panic though. Not when I know Donald Trump the way I do – and not after last month’s drama with Colombian President Gustavo Petro.
Remember how tough he talked while tangling with Trump?
Remember how much the media freaked out over the international incident?
Remember how quickly they all had to eat their words when Petro backed down in less than a day?
Apparently, financial writers didn’t remember any of that, two weeks ago though it was. Or they conveniently ignored it, just like they’re now conveniently ignoring how:
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The Mexican economy contracted in the fourth quarter.
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The Canadian government is in turmoil, with citizens deeply distrusting their leaders.
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The Chinese economy is struggling from “deflation, devaluation, capital flight, and the loss of foreign investment – all at the same time,” as a recent Forbes article proclaimed.
They’re not in great positions to hold out against Trump’s very reasonable border demands. All he wants is for them to stop exploiting our borders to overrun us with dangerous drugs and illegal immigrants.
That’s why I predicted Monday morning that this wouldn’t take long, adding, “Stay calm folks. This is a drug war, not a trade war with Canada and Mexico. Long many blue-chip stocks.”
Sure enough, it wasn’t even noon yesterday before Mexico caved, agreeing to “reinforce the northern border with 10,000 members of the National Guard immediately to stop drug trafficking from Mexico.” Those are Mexican President Claudia Sheinbaum’s words, as posted on social platform X.
And Canada complied as well that evening.
But even if we didn’t see such immediate progress, I wouldn’t have been worried. Not when I hold wide-moat stocks throughout my portfolio.
Warren Buffett’s Wide-Moat Results on Display
The term “wide moat” isn’t one I came up with. It’s actually a centuries-old concept that legendary investor Warren Buffett coined decades ago.
My regular readers might remember the last time I wrote about this
in October. But considering this year’s turmoil so far, it seems more than worth repeating:
It was Warren Buffett who popularized the idea of a business “moat” while answering a question at the 1995 Berkshire Hathaway (BRK.A) (BRK.B) shareholders meeting. He said his conglomerate’s goal was to find businesses that feature “wide and long-lasting moat[s].”
Each one should protect “a terrific economic castle with an honest lord in charge of the castle” – one who won’t waste that wide-moat advantage.
In other words, he looks for companies with businesses that are well protected against competition.
Berkshire Hathaway’s top five holdings are all A-rated and account for over 70% of the portfolio.
Source: Wide Moat Research
Their wide moats might be because they offer consistently better prices than the competition. Or they have a first-mover advantage. Or, like Apple (AAPL), they’ve created a unique brand appeal.
These companies aren’t fallible, mind you. As
I wrote on Monday, Apple’s once all-but-untouchable consumer base is slipping. While the company did report better-than-expected earnings this past Friday:
… quarterly sales in China dropped 11.1% thanks to local manufacturers Huawei and Xiaomi. Those two have been cutting into its profits for several years now…
We also learned that iPhone sales specifically plunged 25% year over year there as Huawei shipped 37% more of its models.
So Apple’s moat isn’t quite as wide as it used to be.
But that’s why you don’t put all your hopes into a single stock, wide moat or otherwise. You diversify across a number of them in various sectors so that, even if one does start drying up, all the others can buoy your portfolio up.
Sleep Well at Night With Sustainable Profits
Have you seen a chart of Berkshire Hathaway’s stock under its wide-moat mentality? It’s up over 24,400% since 1985.
Source: Google Finance
That’s despite multiple market crashes, trade wars, government transitions, recessions, and other market-moving drama. Berkshire Hathaway with its wide-moat holdings just keeps moving up.
This track record gives its shareholders amazing amounts of peace of mind – which is precisely what I want you to have.
Now, you probably don’t have $693,784 to buy a single share of BRK-A right now. And even if you did, I’m not saying you should.
I’m not even recommending the much more reasonably priced BRK-B shares, which were trading at $465.36 last time I looked. There are plenty of other wide-moat stocks out there with much better valuations to get in on.
What I am saying is you don’t have to lose money every time the financial media promotes a fear-mongering story. When you make a habit of investing in companies with the best track records and the best chances of succeeding still, you get used to them paying off, no matter the short-term or even the mid-term news.
Safe and secure in the strength of your positions, you therefore feel much calmer about taking the time to research details and seek out other opinions. For instance, thanks to Iranian-American businessman Patrick Bet-David, host of the PBD Podcast and Valuetainment, 77% of Canada’s exports and 84% of Mexico’s go to the U.S.
In short, they need us a lot more than we need them.
Plus, both countries’ currencies tanked on the news against the dollar. Which means Americans won’t pay nearly so much of a tariff price.
Those kinds of details help you to stay in profitable positions, riding out Mr. Market’s tantrums until he calms down and advances once again.
You get to sleep well at night, and your portfolio gets to keep paying off. That’s the value of a wide-moat focus.
Regards,
Brad Thomas
Editor, Wide Moat Daily
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